The deal will create a group with 243 department stores in Germany, Belgium and the Netherlands and annual sales of €5.4 billion ($6.13 billion).

Stiff Competition

What will become Europe's third biggest department store chain faces stiff competition from e-commerce players such as Amazon and online fashion retailer Zalando, something the regulator noted in its decision which weighs whether merged companies would dominate their market.

"We found that Kaufhof and Karstadt have a market share of more than 25% in only a few categories of goods and regions [...] In addition, online retailers are an important alternative for a rapidly growing number of consumers in most categories of goods," Cartel Office President, Andreas Mundt, said in a statement.

Several people familiar with the matter told Reuters late on Thursday that the cartel office was poised to approve the deal.

Signa will hold a 50.1% stake in the combined company and take the strategic lead on the business' board.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.